Prudence and consistency
Be cautious with uncertain figures, and use the same methods every year. See how each idea changes the profit.
Task 1Prudence: be cautious with uncertain figures3 questions
Many figures in a set of accounts are judgements. Prudence means being cautious when a figure is uncertain, so that assets and income are not overstated and liabilities and expenses are not understated.
One use of it is the rule for inventory. It is valued at cost, or at what it can be sold for if that is lower.
Brindle has oak boards that cost £4,000. They were damaged by a leak and can now be sold for only £3,100.
Task 2Prudence in practice3 questions
Task 3Consistency3 questions